The Barefoot Investor reveals the biggest money mistake parents make

By Dilvin Yasa| 3 weeks ago

We all know that person. The one who blows their entire pay packet on the day they get paid, or the one who has to borrow money every time something goes wrong with their washing machine/car/microwave.

One guy who’s seen more than his fair share of that person is The Barefoot Investor Scott Pape, finance expert and author of The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need.

"You wouldn’t believe the number of 35-year-olds out there who don’t know the first thing about finances,” he tells 9Honey. “And as a parent that’s the last thing you want for your children; to get to adulthood without any clear understanding of how to handle their money and plan for a better financial future.”

Scott Pape. (Supplied)

During his research for this book – the follow-up to the bestselling The Barefoot Investor: The Only Money Guide You’ll Ever Need – Pape says he discovered many parents appeared to believe financial education to be the responsibility of schools.

"It’s a mistake because we know children learn by watching their parents, and in fact, one Cambridge Study found that people’s money habits are actually formed by the age of 11, which is a pretty scary statistic."

Keen to steer your little ones onto the right path? One where they don’t have to borrow money to keep on top of monthly bills?

Pape says the foundation for their future financial security can be laid with the following three tips.

Invest in a jam jar system

The next time you’re in a two-dollar store, purchase three jam jars and label them Splurge, Smile and Give. The first is for day-to-day spending, the second is a savings 'fund', while the third is exactly as it sounds – designed to give to others.

"To idea to get kids working and thus understanding what it means to earn money for a job well done," says Pape, who recommends giving kids three jobs a week in order to earn their pocket money (rates vary but many commonly pay one dollar per year so that a five-year-old would receive $5 a week to complete his or her weekly chores).

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What’s important is giving your child their $5 in coins so that they can split the amount between the jars as they see fit.

“Yes, they’ll make mistakes along the way but that’s okay,” explains Pape. “What’s important is they get into the habit of putting money into savings and giving to others so that they don’t grow up to become spoilt, ungrateful brats.”

Insist your teen gets a job

A Maccas future may not seem particularly glamorous to your teen, but Pape swears an after-school gig is a gateway drug to a decent financial education.

“It’s not just about making money, but about the lessons that go along with that,” he says. “They have to learn to sell themselves during a job interview, they have to learn to work with people they not normally rub shoulders with, and they’ll have to get a bank account.”

When it comes to life lessons, it doesn’t get much better than learning to deal with irate customers so you can make enough money to pay for your mobile phone bill.

Be a solid role model

It’s all well and good to tell your kids to do save for a rainy day and to stop blowing money on unnecessary items, but what are you showing them? The number one secret to raising financially strong kids is to be a finally smart parent, says Pape.

“Notice I didn’t say financially wealthy because this has nothing to do with how much money comes into your own hands each week and everything to do with modelling good behaviour, such as saving for things yourself and showing how to adult responsibly.”

Your kids will get tested on a lot of things throughout their life, but financial education is the one thing everyone gets tested on every single day, he adds. “So make sure finance is a part of your daily conversation in the home. It might make you feel a little uncomfortable until you get used to be, but it’s a dialogue – a rolling one – that will pay dividends in the long-run.”

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need, $29.99, is published by HarperCollins.